Renewable Energy:

ITIF's Stepp discusses threat to U.S. clean energy economy

OnPoint

Aired: Tuesday, June 19, 2012

Can the United States and China both compete and collaborate on clean energy innovation? During today's OnPoint, Matthew Stepp, a senior analyst with the Information Technology and Innovation Foundation, discusses the threat to the United States' clean energy economy resulting from the use of subsidies and other trade practices by international competitors. He also explains why he believes the use of subsidies is impairing innovation.

Monica Trauzzi: Matt, the Senate energy committee recently took up the issue of competitiveness and collaboration between the U.S. and China on clean energy. Does an overall threat exists to the U.S.'s clean energy economy?

Matthew Stepp: It really does and it's not even just for the U.S. clean economy, it's for the global clean economy as well. There are a lot of countries that are trying to take the easy way out and game the system to quickly gain market share, which is at the peril for the long-term sustainability of the industry.

Monica Trauzzi: What can the United States do that then to sort of shield itself from some of these practices?

Matthew Stepp: What the United States can do and what I think all good innovation countries should do is aggressively prosecute countries that utilize green mercantilism practices. So that very much may include tariffs.

Monica Trauzzi: But are all these practices unfair or are there certain things that other countries are doing just because they're better at the game or they're more competitive and they're just doing a better job than the United States?

Matthew Stepp: There is actually a subset of policies that are much more egregious than others. So, for instance, you have unfair subsidies and export dumping which we've been talking more and more about because of the Department of Commerce ruling. But then there are things like IP theft, forced technology transfer, limiting access to foreign companies to get government procurement contracts that are much more egregious than just subsidizing consumers to purchase clean energy.

Monica Trauzzi: But then what does this all mean for U.S. consumers? For example in the case of the solar panels, you know, if we're placing tariffs on the Chinese imports, then that might have some negative impacts on the U.S. solar industry.

Matthew Stepp: It will in the very short term. It will marginally raise prices, but those prices are already artificially low. So, we can't rely on China or other companies, or other countries to subsidize clean energy forever. We've got to think about what's the goal here? So, if our goal is to drastically reduce carbon dioxide emissions, we need to start thinking about what technologies we need 20 years from now, 30 years from now, and how we're going to develop those technologies. Green mercantilism actually reduces the incentive to produce those technologies and locks us into less cost competitive or less performing technologies that we have today.

Monica Trauzzi: So, you're arguing that countries are innovating less as a result of these subsidies and other practices?

Matthew Stepp: Not only are the green mercantilism countries innovating less because they're focusing on existing technologies and just grabbing quick market share, but because of those countries using those policies they're disincenting other foreign competitors and firms and entrepreneurs to invest in innovative new technologies.

Monica Trauzzi: So, the big focus here has been on the U.S. and China, like you said, with the solar case, but there are other countries that the U.S. should be looking out for. What are some of those other countries?

Matthew Stepp: We list a lot of examples in the report. For example, South Korea has standards for their solar panels that the way the standard was written excludes thin-film panels from being okayed in their country, which essentially cuts out U.S. thin-film producers from using their markets. And then another example being Italy and Brazil and China and India that use domestic content requirements that require companies to produce the technologies in their countries to gain the tax incentives and subsidies and feed-in tariffs that they're offering, which automatically gives preferential treatment to their domestic firms and not their competitors.

Monica Trauzzi: And you mentioned the report, I just want to list the title, "Green Mercantilism: Threat to the Clean Energy Economy" that your group just put out this week. So, at this energy committee hearing that happened last week, Senator Murkowski said that imitating China is not the best way to compete with China. So then what is the solution for the United States? If it's not to sort of adopt some of these industrial practices, what are the steps forward for the U.S.?

Matthew Stepp: First we need to really aggressively work to eliminate green mercantilism from the global clean energy industry and, again, that goes back to prosecuting those countries, not actually utilizing those technologies when we purchase them for government contracts, things like that, shut off our market to any country that wants to continually subsidize in an illegal way or go against WTO rules. But we also need to double down on innovation, so we can't lose, we can't fear green mercantilist countries that are going to dominate the market. We need to continue investing in new technologies, continue investing in things like R&D. That doesn't necessarily mean we need to subsidize all of our technologies. We need to keep producing better and better technologies.

Monica Trauzzi: All right, we'll end it there. Thank you for coming on the show.

Matthew Stepp: Thanks.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.